World Bank raises 2016 oil price forecast

In its latest "Commodity Markets Outlook," the Washington-based global lender raised its crude oil price forecast for this year to US$41 per barrel, from its January projection of US$37 per barrel.

The upward revision in oil price projections reflects improving market sentiment and a weakening U.S. dollar, and the World Bank also expects a smaller supply overhang.

"We expect modestly higher prices for energy commodities over the course of the year, as markets rebalance after a period of oversupply," Xinhua quoted John Baffes, lead author of the report, as saying.

"However, energy prices could fall further if OPEC were to significantly increase production and non-OPEC production does not decline as fast as we expect."

Oil prices have rebounded from US$25 per barrel in mid-January to more than US$40 per barrel in April, supported by supply disruptions in Iraq and Nigeria, and falling non-OPEC production, mostly of U.S. shale oil.

Despite the upward revision, the World Bank said oil prices are still expected to average lower than last year. Energy prices, including oil, natural gas and coal, are forecast to fall by an annual 19.3 percent this year, the World Bank said, which is much smaller than its January forecast of a 24.7 percent decline.

Persistent high inventories and weak growth prospects in emerging and developing economies are key factors keeping energy prices lower than last year, the World Bank said.

The World Bank cut its forecast for agricultural prices, as it sees 2016 as another bumper harvest year for most grains and oilseeds. The bank expects agricultural prices to fall 4.0 percent this year.

Metal prices are projected to decline by 8.2 percent this year, less than the bank’s January forecast of a 10.2 percent drop. The upgrade reflects expectations of robust demand growth from China, the World Bank said.  (Uu.A026)

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